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Interview with the President

Preserving the planet and creating a safe, secure automotive society. President and CEO Nobuaki Katoh

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  • Q1
  • Please give us an update on the Global Mid-term Policy. How much progress has been made?

Answer

A

On creating the DENSO Group Global Mid-term Policy, we set several objectives for fiscal 2016 (the year ending March 2016), namely to expand business to ensure continuous future growth, to evolve by continuing to develop world-first products, and to facilitate Group-wide collaboration worldwide and speed up corporate management.

In fiscal 2014, the second year of the Global Mid-term Policy, the DENSO Group expanded business globally. In the environmental field, we developed a new diesel common rail fuel injection system with the world's highest injection pressure of 2,500 bar. In the security and safety field, we developed active safety systems that prevent traffic accidents from happening for not only luxury vehicles, but also compact cars, large-scale trucks, and large tourist busses. Leveraging our technologies in automotive products, we made progress on expanding aftermarket business and new businesses.

As a result of these initiatives, in fiscal 2014, the DENSO Group achieved ahead of schedule its targets for net sales of ¥4,000 billion and an operating margin of 8.0%. With fiscal 2015 the final year of the Global Mid-term Policy, the DENSO Group is determined to see through its ongoing business activities to satisfactory outcomes.

  • Q2
  • What is your view of business conditions inside and outside Japan?

Answer

A

In fiscal 2014, the world economy grew at a faster clip than last year, even though growth slowed in emerging countries. In Japan, the economy was buoyed by stimulus measures and yen depreciation.

Turning to the automotive industry, despite signs of slowing growth in emerging markets in Asia, such as Thailand and India, the automobile industry expanded overall, achieving record-setting sales volume thanks to market growth in China and advanced economies including North America. In Japan, sales were partially affected by the downward correction to robust demand attributable to eco-car subsidiaries during the previous year. Looking at the year as a whole, however, sales volumes increased owing to a pick-up in the economy, the launch of compelling new models, and the front-loading of demand prior to the consumption tax hike.

In fiscal 2015, we project that the global economy will expand moderately, driven by growth in advanced economies while growth continues to taper in emerging economies. Regarding the Japanese economy, we are concerned that domestic demand will be weak for a while in the wake of the consumption tax hike, but we expect gentle expansion from the second half of the year on the back of strong exports and economic stimulus measures.

Turning to the automobile industry, we forecast mild growth overall, as economic growth may flatten out in emerging countries. In Japan, we expect demand to be weaker than the previous year owing to the consumption tax hike.

  • Q3
  • What measures are being taken to bolster competitiveness?

Answer

A

The DENSO Group has been developing new products and production lines to strengthen its cost competitiveness.

In fiscal 2014, DENSO developed the world's first automotive climate control units for automobiles that can be installed in a wide range of models, from compact car to luxury vehicles, without regard to manufacturer or sales region. Using new technologies to shrink the size of components by 20% and innovative engineering to conform the dimensions to car designs, we were able to standardize air conditioning units, which had until now differed for each car model, down to six varieties from the previous 18 types. As a consequence, development costs, which had been required for each car model, have been reduced considerably. The new air conditioning systems have been deployed in the Harrier, Noah, and Voxy models. We aim to expand their deployment to other models while accelerating the development of more standardized products like this.

Moreover, DENSO continued to transition to leaner and more competitive Dantotsu plants. In fiscal 2014, we broadened the scope of this transition from the field of forging to the field of treatment processing, and developed a revolutionary painting facility that requires only 1/15th the space at 1/5th the equipment cost, and also realized a 30% reduction in processing costs. We plan to deploy this painting facility to our other plants.

In fiscal 2015, we forecast a temporary decline in profits as domestic automobile output decreases following the consumption tax hike and as we make investments to enhance our future competitiveness. From fiscal 2016 onward, however, we look for earnings to increase as we should begin to see returns on our investments in new plants and products while benefits crystallize from our efforts to strengthen cost competitiveness.

  • Q4
  • What are your views on shareholder returns?

Answer

A

At DENSO, we strive to meet the expectations of all shareholders through consistent increases in cash dividends, giving due consideration to a comprehensive range of factors, including consolidated performance and the dividend payout ratio. Our dividend payout ratio target is 30%. We will consider future returns after the minimum required earnings retention for appropriate investment and development, taking into account the difficult business environment.

In light of our recent performance and the operating environment, we declared an annual dividend of ¥105.00 per share for the fiscal 2014, an increase of ¥41.00 from the previous year.

We are continually striving to provide a stable return of profits to shareholders.